Sunday, August 23, 2009

Starting A Business

It's official, we've been out of credit card debt for a little while now and are able to look beyond that debt. We still have some medical debt to be taken care of, but they are not pursuing us, so we are going to put them on hold for now. Our priorities are now the following:

1. Be at least a month ahead on our usual expenses (meaning 1 month emergency fund at $2500).
2. Start a business

Back in college I started a software company with a friend from high school, but things did not turn out well with that business. Since then I have wanted to create a new one that becomes successful, but one thing or another has occurred. With all of our debt, it has been difficult to consider starting one, but we feel we can now.

We're going to start an urban farm and sell the produce at farmer markets, through CSA's, and to restaurants. An urban farm utilizes multiple back yards in an urban/suburban setting, reducing the land costs and bringing the food miles down significantly (the distance the food travels to the consumer is called food miles). We are looking at farming a 1/2 an acre, which is about 20X what we have been doing at our home the past 2 years. Out of that 1/2 acre, our financial goal for gross income is $50K. We will be utilizing bio-intensive methods to produce a lot more than what can normally be produced on 1/2 an acre. We will be hiring an agriculture college student on an either part-time or full-time basis during the summer to assist my wife with the manual labor. We plan on starting at 1 farmer market that occurs on a Saturday and expanding to a second one if needed.

The first year of the business our main goal is to break even with our expenses. Our stretch goal is to have a net profit of $20K on $30K of expenses. All of the expenses will be cash-flowed from extra cash in our monthly budget and then the income from the business. We don't want to get into debt for the business as that will mean monthly payments and interest expenses. We are writing up our business plan that will include such things as a 3 year plan, our exit strategy, marketing, pricing, and crop schedules. Half of the profits will be going towards our debts with the rest going towards expanding the business.


Dedicated said...

This sounds like an amazing business idea for you, especially since you are an experienced gardener.

What about land? Where will you have this garden? To make those numbers, you are going to need a huge garden right?

What about starting smaller and selling some of your goods at the farmers markets? Then moving all the profits over into reinvestment to make this thing a fabulous income stream. Possibly one that can be done by you and your family on weekends for extra cash.

Sick of Debt said...

Regarding land, we have someone from our church with a lot of land nearby that we are talking with. If that does not work out, there are several plots within the city that we'll be talking to the owners about.

The reason we're looking at such a large goal ($50K in sales) is because there are a lot of fixed costs that exist whether we have $10K in sales or $50K in sales (eg: licensing, food safety certification, walk-in cooler, tools, etc). We're also wanting this to not just be an "S" type (Self-Employed, from the Rich Dad/Poor Dad quadrants) as that does not expand well. If we can get the infrastructure setup in the coming year for it to gross $50K/yr, we can look at it doing $500K/yr in a couple of years.